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Barbara  Wein6tat\  ttttuvta  an 
Cjje  iJlorals  of  STratie 


HIGHER  EDUCATION  AND  BUSINESS 
STANDARDS.       By    Willard     Eugene 

HoTCHKISS. 

CREATING  CAPITAL:  MONEY-MAKING 
AS  AN  AIM  IN  BUSINESS.   By  Frederick 

L.    LiPMAN. 

IS  CIVILIZATION  A  DISEASE?  By  Stan- 
ton COIT. 

SOCIAL  JUSTICE  WITHOUT  SOCIALISM. 
By  John  Bates  Clark. 

THE  CONFLICT  BETWEEN  PRIVATE  MO- 
NOPOLY AND  GOOD  CITIZENSHIP,  By 
John  Graham  Brooks. 

COMMERCIALISM  AND  JOURNALISM.  By 
Hamilton  Holt. 

THE  BUSINESS  CAREER  IN  ITS  PUBLIC 
RELATIONS.     By  Albert  Shaw. 


CREATING    CAPITAL 

MONEY-MAKING  AS   AN   AIM   IN 
BUSINESS 


CREATING  CAPITAL 

MONEY-MAKING   AS    AN    AIM 
IN  BUSINESS 

BY 

FREDERICK  L.  LIPMAN 


BOSTON    AND  NEW   YORK. 

HOUGHTON    MIFFLIN    COMPANY 

(Sbe  IfiibeciEiibe  ptt^^  Cambcitioe 

1918 


COPYRIGHT,    I91S,   BY  THE   REGENTS   OF  THE   UNIVERSITY  OF 
CALIFORNIA 

ALL   RIGHTS   RESERVED 

Published  March  iqiS 


CAMBRIDGE  .  MASSACHUSETTS 
U   .  S   .  A 


\' 


L5 


^  U  «^  X  (J 


UNiVEkSm-  OF  CALlFORNl/% 
f^JNTA  BARBARA  COLLt-GE  l.IEIL\R^ 


BARBARA  WEINSTOCK 

LECTURES  ON  THE  MORALS 

OF  TRADE 

This  series  will  contain  essays  by 
representative  scholars  and  men  of 
affairs  dealing  with  the  various  phases 
of  the  moral  law  in  its  bearing  on 
business  life  under  the  new  economic 
order,  first  delivered  at  the  University 
of  California  on  the  Weinstock  founda- 
tion. 


CREATING  CAPITAL 

MONEY-MAKING  AS  AN  AIM  IN 
BUSINESS 

THE  object  of  this  paper  is  to  dis- 
cuss money-making ;  to  examine 
its  prevalence  as  an  aim  among  people 
generally  and  the  moral  standards  which 
obtain  among  those  who  consciously 
seek  to  make  money. 

The  desire  to  make  money  is  com- 
mon to  most  men.  Stronger  or  weaker, 
in  some  degree  it  is  present  in  the  mind 
of  nearly  every  one.  Now,  how  far  does 
this  desire  grow  to  be  an  aim  or  object 
in  our  lives,  and  to  what  extent  is  such 
an  aim  a  worthy  one  ? 


1  CREATING  CAPITAL 

The  typical  money-maker  as  com- 
monly pictured  in  our  imagination  is  a 
narrow,  grasping,  selfish  individual  who 
has  chosen  to  follow  lower  rather  than 
higher  ideals  and  who  often  is  tempted, 
and  always  may  be  tempted,  to  employ 
illegitimate  means  for  the  attainment  of 
his  ends.  The  aims  he  has  adopted  are  . 
made  to  stand  in  opposition  to  the  prac- 
tice of  certain  virtues.  Thus  we  con- 
trast profits  and  patriotism;  enriching 
one's  self  and  philanthropy;  getting  all 
the  law  allows  and  justice;  taking  advan- 
tage of  the  other  fellow  and  honesty ; 
becoming  engrossed  in  acquisition  and 
love  of  family.  Now,  such  contrasts  ob- 
viously prove  nothing  more  than  that 
money-making  is  and  would  be  a  vicious 


MONEY-MAKING  AS  AN  AIM    3 

aim  if  pursued  regardless  of  these  virtues, 
and  it  could  well  be  replied  that  con- 
sideration of  patriotism,  philanthropy, 
love  of  family,  etc.,  must  in  themselves 
impel  one  to  earn  and  to  save.  "The 
love  of  money  is  the  root  of  all  evil'* 
implies  an  exclusive  devotion  to  acqui- 
sition that  may  well  be  criticized.  But 
aside  from  this  there  is  no  doubt  that 
amid  the  confused  ideas  held  on  the 
subject,  aiming  to  make  money  is  com- 
monly regarded  as  in  some  sort  of  an- 
tagonism to  the  social  virtues. 

That  there  are  other  sides  to  the  pic- 
ture is  recognized,  however,  even  by  the 
loose  thought  of  the  day.  The  man  who 
earns  his  living,  for  instance,  it  views  as 
one  who  in  so  far  is  performing  a  fun- 


4  CREATING  CAPITAL 

damental  duty.  Indeed,  the  world  scorns 
him  who  cannot  or  will  not  support 
himself  and  his  family.  But  this  is  only 
to  say  that  one  must  work  to-day  to 
meet  the  expenditures  of  to-day.  Is  this 
the  limit?  Is  it  a  virtue  for  him  to  work 
in  order  to  spend,  but  a  vice  for  him  to 
work  in  order  to  save?  What  are  the 
considerations  to  be  observed  by  a  man 
in  deciding  whether  or  not  he  should 
adopt  money-making  —  that  is,  the  ac- 
quisition of  a  surplus  beyond  his  current 
needs  —  as  one  of  his  definite  aims  in 
life? 

One  consideration  relates  to  our 
country.  The  United  States  is  now  un- 
derstood to  be  spending  about  $25,000,- 
000  per  day  in  carrying  on  the  war.  In 


MONEY-MAKING  AS  AN  AIM     5 

the  last  analysis  this  amount  must  be 
paid  out  of  the  past  savings  and  the  sav- 
ings from  current  earnings  of  the  peo- 
ple of  the  United  States.  The  wealth  of 
the  nation  consists  mainly  of  the  sum 
of  the  wealth  of  its  citizens.  We  are 
therefore  told  to  seek  increased  earnings 
and  to  economize  in  our  expenditures 
in  order  to  enhance  the  national  wealth. 
The  duty  here  is  perfectly  clear,  but  even 
if  we  did  not  have  war  conditions  to 
teach  us  as  a  patriotic  responsibility  the 
necessity  of  earning  and  saving  a  surplus, 
the  obligation  would  still  be  there.  We 
owe  a  similar  debt  to  our  state  and  to 
our  city  or  district.  And  nearer  still 
comes  the  duty  to  one's  family  and  to 
one's  own  future,  the  duty  of  providing 


6  CREATING  CAPITAL 

for  the  rainy  day,  for  old  age.  And  it 
will  be  observed  that  money-making  in 
this  sense  is  directed  to  the  acquisition 
oi  net  income,  it  relates  to  that  portion 
of  one's  earnings  which  is  saved  from 
current  expenditure  and  becomes  capi- 
tal. Then  we  must  also  consider  the 
duty  to  society.  As  we  look  out  upon 
the  surrounding  evidences  of  civiliza- 
tion —  buildings  and  railroads  and 
highly  cultivated  fields,  the  machinery 
of  production  and  distribution,  the  shops 
full  of  useful  commodities  —  and  then 
cast  our  thought  backward  to  a  time  not 
very  many  years  ago  when  all  this  coun- 
try was  a  natural  wilderness,  we  may 
begin  to  realize  the  magnitude  of  the 
wealth,  the  capital,  that  has  come  into 


MONEY-MAKING  AS  AN  AIM    7 

being  since  then,  every  particle  of  which 
is  due  to  the  earnings  and  savings  of 
somebody,  to  the  surplus  not  consumed 
by  the  workers  of  the  past,  their  unex- 
pended and  unwasted  net  balances  year 
by  year.  Universities,  churches,  libra- 
ries, parks,  are  included  in  the  wealth 
thus  handed  down  to  us.  Our  lives  to- 
day may  be  richer  and  broader  through 
this  inheritance  created  by  the  industry 
and  abstinence  of  our  forefathers.  Their 
business  careers,  now  closed,  we  regard 
as  the  more  successful  in  that  they 
earned  and  saved  a  surplus,  that  they 
had  a  net  income  to  show  as  the  result 
of  their  work. 

But  these  savings  of  the  past  were  ac- 
cumulated,  after  all,  by  comparatively 


8  CREATING  CAPITAL 

few  of  the  workers;  not  by  the  many, 
who  lived  from  hand  to  mouth,  happy- 
go-lucky,  spending  and  enjoying  in  time 
of  abundance,  suffering  in  time  of  pov- 
erty and  stress,  making  no  provision  even 
for  their  own  future,  still  less  recognizing 
any  duty  to  their  country  or  to  posterity 
to  produce  economically  and  regulate 
their  expenditure  wisely  so  as  to  carry 
forward  a  surplus.  As  far  as  this  major- 
ity is  concerned  we  might  yet  be  living 
among  rocks  and  trees,  without  shelter, 
lacking  sure  supplies  of  food,  with  fig 
leaves  to  cover  our  nakedness.  And  to- 
day the  same  conditions  obtain.  How 
many  persons  are  to  be  found  among 
one's  acquaintance  who  feel  and  act  upon 
any  responsibility  for  doing  their  "bit" 


MONEY-MAKING  AS  AN  AIM    9 

in  the  creation  of  capital  ?  Very  few. 
Rather  than  exert  himself  to  work  with 
this  in  view,  on  the  one  hand,  and  to  ab- 
stain from  unnecessary  consumption,  on 
the  other  hand,  the  ordinary  man  will 
make  to  himself  every  excuse.  He  will 
contemn  money-making  as  a  sordid  aim, 
readily  exaggerating  itself  into  a  vice; 
he  will  dwell  upon  the  obligations  and 
other  considerations  of  a  higher  life,  this 
being  defined  as  something  generous  and 
noble,  a  something  compared  with  which 
money-making  cannot  be  regarded  as  a 
worthy  object  but  must  be  included  in 
the  class  of  unpleasant  necessities,  not  to 
say  indecencies,  which  ought  to  be  rele- 
gated to  the  background  of  life;  he  will 
summon  up  pictures  of  extreme  poverty. 


lo  CREATING  CAPITAL 

where  any  money  received  must  be  ex- 
pended forthwith  to  meet  urgent  needs, 
as  justifying  that  which  in  his  case  is 
the  gratification  of  shiftless  indulgence. 
Above  all,  this  typical  individual  will  not 
accept  and  act  upon  the  idea  that  his 
affairs,  his  small  income  and  expendi- 
ture, have  any  bearing  upon  the  pros- 
perity and  progress  of  his  country.  The 
most  he  will  keep  before  him  is  that  he 
should  pay  his  bills,  and  perhaps  in  some 
few  cases,  will  extend  the  notion  to  the 
future  to  include  provision  for  the  bills 
and  possible  emergencies  then  to  be  met 
by  himself  and  his  family.  Nor  is  this 
improvident  attitude  confined  to  the 
young,  to  the  professional  and  the  other 
non-business    classes.     In    the    business 


MONEY-MAKING  AS  AN  AIM     ii 

world  we  see  it  all  around  us ;  among 
those  who  "work  for  a  living,"  among 
clerks  and  employees  and  among  the  so- 
called  laboring  classes  it  appears  to  be  the 
normal  attitude.  People  who  work  for 
salaries  or  wages  seem  characteristically  to 
use  up  all  their  earnings  in  their  current 
expenditure,  to  live  up  to  their  incomes 
without  any  serious  attempt  to  save.  If 
they  pride  themselves  upon  trying  to 
keep  out  of  debt,  it  is  as  much  as  they 
expect  of  themselves,  and  among  them 
the  man  who  attempts  to  go  beyond  this 
in  his  money  affairs  is  certainly  the  ex- 
ception. 

One  of  the  effects  of  a  world-wide  war 
is  an  enormously  increased  demand  for 
labor  at  high  and  advancing  wages,  a  con- 


12  CREATING  CAPITAL 

dition  that  we  might  suppose  would  be 
greatly  to  the  advantage  of  the  laborer. 
But  that  will  depend  upon  his  own  at- 
titude and  policy.  From  England,  and 
from  American  towns  here  and  there,  we 
hear  stories  of  the  wage-earner  on  whom 
increasing  income  has  had  the  effect  of 
lessening  the  effort  to  work;  who  stops 
during  the  week  when  the  higher  wage 
scale  has  paid  him  the  amount  he  is  ac- 
customed to  regard  as  a  week's  earnings. 
Now,  would  it  not  seem  natural  to  ex- 
pect that  any  man  encountering  im- 
proved market  conditions  for  his  output, 
whether  of  commodity  or  service,  would 
seek  to  turn  the  situation  to  advantage 
by  increasing  that  output  as  largely  as 
lay  in  his  power?  If,  for  instance,  I  can 


MONEY-MAKING  AS  AN  AIM     13 

manufacture  shoes  to  sell  for  $4.00  a 
pair  and  a  change  in  market  conditions 
is  such  that  I  can  obtain  $5.00  a  pair,  I 
would  endeavor  to  produce  more  shoes 
in  order  to  profit  by  the  favorable  mar- 
ket; and  if  thereafter  the  price  should 
rise  to  $6.00  and  $y.oo  and  $8.00  a 
pair,  at  each  increment  my  efforts 
would  be  still  further  intensified.  That, 
indeed,  is  the  normal  economic  attitude. 
Fluctuations  in  the  price  level  due  to 
changes  in  the  demand  for  a  commodity 
are  expected  to  affect,  and  do  affect,  the 
market  supply.  At  a  higher  price,  pro- 
duction is  stimulated  and  more  units  of 
the  commodity  are  brought  to  the  mar- 
ket, both  from  new  sources  and  from 
old   sources.    Under  falling  prices,  on 


14  CREATING  CAPITAL 

the  other  hand,  the  supply  offered  in  the 
market  would  become  automatically  di- 
minished. 

This  is  an  elementary  commonplace 
in  economics,  yet  the  laborer  to  whom 
we  have  just  referred  does  not  seem  to 
recognize  it.  He  may  find  that  he  can 
earn  in,  say  four  days,  an  amount  equal 
to  his  former  earnings  in  six  days  and, 
therefore,  at  the  end  of  the  fourth  day 
he  quits  work  for  the  week.  Now,  ob- 
viously under  such  increasing  wage  scale, 
he  might  do  one  of  three  things : 

He  could  quit  at  the  end  of  the 
fourth  day,  having  received  a  week's 
income. 

He  could  continue  working  for  the 
six  days  and  use  his  surplus  earnings  for 


MONEY-MAKING  AS  AN  AIM     15 

comforts,  pleasures,  and  luxuries  which 
previously  he  had  been  unable  to  afford. 

He  might  work  for  the  six  days  and 
save  as  much  as  possible  of  his  excess 
earnings. 

Now,  what  is  the  wise  choice  for  the 
laborer  ?  Leaving  out  of  account  special 
cases  where  he  has  a  large  family,  or 
sickness  at  home,  or  is  under  some  other 
disability  which  in  his  individual  case 
would  reduce  his  earning  power  or  in- 
crease his  minimum  expenses,  ought  he 
not  to  work  for  the  six  days,  putting 
aside  all  he  could  of  the  excess  as  sav- 
ings for  the  future  ?  It  will  be  generally 
conceded  that  this  is  self-evident.  If, 
viewing  the  narrow  conditions  under 
which  the  workman  ordinarily  lives,  it 


1 6  CREATING  CAPITAL 

should  be  claimed  that  during  a  period 
of  unusual  earnings  self-gratification 
would  be  not  only  natural  but  measur- 
ably justifiable,  the  reply  could  be  made 
that  this  is  merely  specious,  involving 
assumption  not  in  accord  with  the  facts. 
Excuses  of  this  kind  we  often  make  for 
ourselves  in  the  endeavor  to  justify  our 
indulgence  in  present  pleasure  rather 
than  perform  the  irksome  duty  of  self- 
restraint.  The  laborer  whose  ideals  are 
such  that  he  quits  at  the  end  of  the 
fourth  day  is  not  the  type  of  man  who 
is  going  to  spend  the  two  holidays  in 
pursuing  higher  aims  in  life;  he  is  go- 
ing to  pass  them  in  inaction,  quite  likely 
at  the  grog-shop.  The  man  who  fails  to 
take  advantage  of  the  security  for  the 


MONEY-MAKING  AS  AN  AIM     17 

future  offered  him  and  his  family  through 
the  opportunity  of  saving  from  extra- 
ordinary earnings  is  one  who  is  adding 
to  the  abnormal  demand  for  such  things 
as  phonographs,  jewelry,  spirits,  and 
tobacco.  And  this  helps  to  explain  the 
tremendous  market  for  luxuries  dur- 
ing wartime.  Doubtless  there  are  many 
workmen  who  follow  a  more  rational 
course,  who  are  reaping  and  storing  the 
harvest  for  the  comfort  and  security  of 
themselves  and  their  families  during  the 
winter  of  life.  Could  any  one  think  that 
this  policy  involved  an  aim  that  was 
sordid,  tending  to  draw  them  down,  and 
away  from  higher  considerations  of  life? 
Certainly  a  course  of  careful  planning 
in  one's  affairs  would  be  in  so  far  a  bet- 


1 8  CREATING  CAPITAL 

ter  course  and  on  a  higher  plane  than 
indulgence  in  idleness  or  shiftless  ex- 
penditure of  surplus  for  present  luxuries, 
regardless  of  future  need. 

This  case  of  the  workmen  under  con- 
ditions of  abnormal  wages  seems  excep- 
tional; yet  the  choice  so  presented  to 
him  is  not  very  different  fundamentally 
from  the  choice  normally  presented  to 
all  the  rest  of  us. 

The  young  man  starting  out  in  life 
may  be  as  negligent  of  his  opportunities 
as  the  workman  who  quits  at  the  end 
of  the  fourth  day.  Or  if  he  devotes 
himself  properly  to  his  vocation  he  may 
consume  his  earnings  in  current  self- 
gratification.  If,  however,  he  will  both 
concentrate  on  his  work  and  practice 


MONEY-MAKING  AS  AN  AIM     19 

self-restraint  with  the  purpose  of  creat- 
ing a  saved  surplus,  all  will  agree  in 
considering  him  as  so  far  headed  on  the 
road  towards  success.  In  the  case  of  the 
beginner  this  seems  clear  enough,  but, 
after  all,  the  same  considerations  apply 
to  everybody  else,  whether  in  business 
or  profession,  beginners  or  experienced, 
young  or  old;  to  all  of  us  is  the  same 
choice  presented  daily,  and  at  our  peril 
we  must  make  it  wisely.  The  physician, 
for  instance,  although  he  cannot  afford 
to  pay  more  attention  to  money-making 
than  to  the  welfare  of  his  patients,  to 
his  studies,  to  his  professional  ideals, 
must  not,  on  the  other  hand,  leave  out 
of  account  these  business  duties  and  con- 
siderations which  belong  to  him  as  an 


20  CREATING  CAPITAL 

economic  member  of  society.  He  must 
produce  and  must  consume  with  his 
family,  reasonably,  decently  and  thriftily. 
He  must  aim  at  a  surplus  to  store  away 
for  the  future.  These  aims  are,  as  a  mat- 
ter of  course,  secondary  to  his  profes- 
sional ideals,  but  there  need  be  no  con- 
flict of  duty.  The  point  is  that  there 
exists  a  department  of  his  activity  de- 
voted, and  to  be  devoted,  by  him  to  his 
business  affairs.  In  any  event,  as  a  man, 
a  husband,  a  father,  a  citizen,  he  cannot 
escape  from  the  responsibility  of  these 
business  affairs.  They  must  be  conducted 
in  some  way.  Shall  it  be  well  or  ill?  If 
he  fails  herein  it  may  involve  failure  in 
any  or  all  these  relations  —  as  a  man, 
husband,  father,  citizen.  And  obviously 


MONEY-MAKING  AS  AN  AIM     ai 

these  same  considerations  apply  to  all 
other  men  and  women,  whatever  may 
be  their  professions,  occupations,  or  major 
interests  in  life.  Why  do  so  many  allow 
themselves  to  be  dragged  along,  living 
from  hand-to-mouth,  in  fear  of  the 
knock  of  the  bill  collector  at  the  door? 
Why  do  we  associate  money  questions 
with  that  which  is  unhappy,  unfor- 
tunate, down-at-the-heel,  with  fear  and 
misery  ?  Barring  mere  accidents,  it  is 
because  we  are  careless,  shiftless ;  be- 
cause we  do  not  face  the  problem  man- 
fully, practice  reasonable  self-restraint, 
consider  the  subject  in  its  complexity  and 
decide  upon,  and  carry  out,  a  construc- 
tive programme.  Even  if  one  happens 
to  possess  wealth,  he  is  not  exempt.  In- 


22  CREATING  CAPITAL 

deed,  large  wealth  involves  still  greater 
necessity  for  care  in  the  conduct  of  one's 
pecuniary  affairs.  The  rich  man  is  said 
to  have  perplexities  and  responsibilities 
which  are  unknown  to  those  in  mod- 
erate circumstances.  In  fine,  everyone 
must  face  these  money  questions  or  be 
driven  by  them. 

Those  who  live  on  fixed  incomes, 
whether  from  salary  or  investment,  may 
find  it  impossible  to  make  any  direct 
attempt  to  make  money ;  for  them  the 
problem  is  to  be  confronted  and  mas- 
tered on  its  other  side,  the  side  of  spend- 
ing and  saving,  that  the  income  may  be 
apportioned  as  wisely  as  possible  for  the 
purposes  of  living.  But  during  the  last 
few  years  a  new  factor  has  entered  into 


MONEY-MAKING  AS  AN  AIM     23 

the  money  problems  of  the  individual, 
often  adding  to  his  trials,  often  adding 
to  his  self-made  excuses,  and  especially 
burdensome  to  the  man  on  fixed  income. 
We  refer  to  the  high  cost  of  living. 
Here  it  is,  however,  that  the  wage  earner 
can  do  something  in  self-protection,  for 
the  level  of  prices  may  be  in  some  meas- 
ure affected  by  his  policy  in  handling 
his  earnings. 

A  period  of  high  wages  is  accom- 
panied by  and  is  in  some  sense  an  inci- 
dent of  a  high  level  of  prices.  Now  we 
recognize  high  wages,  considered  in  it- 
self, as  beneficial  to  the  community,  for 
it  gives  opportunity,  at  least,  for  com- 
forts in  life  and  a  provision  for  the  future 
that  otherwise  would  be  lacking.  But  if 


24  CREATING  CAPITAL 

prices  have  advanced  as  much  as  wages, 
the  apparent  improvement  to  the  laborer 
is  merely  in  nominal  wages,  while  that 
which  alone  can  benefit  him  is  higher 
real  wages.  Now  let  us  see  what  the 
workman  could  do  to  advance  real  wages 
as  contrasted  with  nominal  wages. 

What  will  be  the  effect  on  prices  of 
the  use  of  surplus  earnings  during  a  pe- 
riod of  high  wages  ? 

If  the  surplus  earnings  are  expended, 
they  will  be  used  either  in  meeting  the 
higher  prices  of  customary  commodities, 
or  in  meeting  these  advanced  prices  and 
also  in  purchasing  additional  commodi- 
ties. The  first  case  will  occur  only  if, 
and  when,  the  advance  in  price  equals 
the  advance  in  wages,  for  only  in  that 


MONEY-MAKING  AS  AN  AIM    25 

event  will  the  new  wages  just  cover  the 
new  cost  of  customary  commodities. 
Then  this  expenditure  of  the  entire  in- 
come in  customary  commodities  tends 
to  keep  up  the  price  level  and  any  benefit 
from  higher  wages  disappears. 

In  the  second  case,  so  far  as  the  worker 
spends  his  surplus  earnings  in  meeting 
advanced  prices  for  customary  commodi- 
ties, he  tends  to  maintain  prices  at  the 
higher  level,  and  so  far  as  he  buys  ad- 
ditional commodities,  he  increases  the 
demand  for  them  and  tends  further  to 
advance  the  price  level. 

If,  on  the  other  hand,  the  worker  will 
save  from  his  surplus  earnings,  he  will 
increase  the  community's  capital,  and 
this  will  tend,  directly  or  indirectly,  to 


26  CREATING  CAPITAL 

cause  the  production  of  further  com- 
modities, so  increasing  the  supply  of 
commodities  and  therefore  tending  to 
reduce  prices. 

In  any  case,  the  worker  should  save 
as  much  as  possible,  as  this  tends  to  re- 
duce the  price  level  and  so  to  better  his 
condition.  Or,  putting  it  more  simply, 
in  time  of  high  wages  the  worker  ought 
to  produce  as  much  as  possible  and  con- 
sume as  little  as  possible,  both  influences 
tending  to  increase  the  stock  of  com- 
modities for  his  ultimate  gain  and  for 
that  of  the  community. 

In  fact,  a  high  level  of  prices  may  be 
due  measurably  to  some  wasting  of  the 
world's  capital  —  as  in  war,  for  instance 
—  and  then  the  only  antidote  is  to  re- 


MONEY-MAKING  AS  AN  AIM     27 

store  the  capital,  a  movement  that  would 
doubtless  occur  anyway  in  time  but  which 
could  be  greatly  accelerated  through  a 
general  adoption  of  habits  of  thrift  and 
saving  throughout  a  community. 

This  then,  though  small,  is  something 
definite  that  we  can  contribute  to  the 
material  advancement  of  mankind  and, 
like  the  duty  in  this  connection  to  our 
nation,  to  our  families  and  ourselves,  it 
consists  in  creating  capital ;  that  is,  earn- 
ing as  much  as  we  can  and,  in  any  event, 
even  if  our  earnings  are  fixed,  managing 
the  income  thriftily,  and  carrying  for- 
ward as  large  a  net  result  as  possible. 

We  turn  now  from  the  mass  of  man- 
kind, on  the  whole  so  singularly  neglect- 
ful of  these  responsibilities,  to  the  few 


28  CREATING  CAPITAL 

in  number  who  constitute  the  creators 
of  capital,  to  whom  are  due  so  much  of 
the  comforts,  the  conveniences,  and  the 
material  advantages  that  go  to  make  civ- 
ilized life  possible.  Now  these  few  are 
found  in  every  rank  in  life.  They  may 
be  rich  or  poor,  professional  or  business 
men,  employer  or  employee,  old  or 
young,  male  or  female.  The  character- 
istic is  their  habit  of  thrift,  of  definitely 
adopting  money-making  as  an  aim,  of 
spending  less  than  they  earn.  It  is  as- 
tonishing what  a  small  percentage  of 
mankind  they  are.  The  Income  Tax 
returns  in  the  United  States  for  1916 
showed  that  out  of  a  population  of  1 04,- 
000,000  people  those  with  taxable  in- 
comes aggregated  only  336,652,  about 


MONEY-MAKING  AS  AN  AIM    29 

one  in  three  hundred.  But  whatever  be 
the  rank  of  the  individual  practicing 
this  thrift  he  is  headed  in  the  right  di- 
rection and  he  tends  to  reach  the  point 
of  relative  competence,  of  independence 
in  his  pecuniary  affairs. 

Preeminent  in  the  class  of  the  thrifty 
we  think  of  the  man  of  affairs;  the 
business  enterprise  indeed  is  supposed 
to  be  the  money-maker,  par  excellence. 
Money-making  is  in  fact  considered  as 
its  raison  d'etre;  it  is  as  a  money-maker 
that  the  business  man  is  contemned  by 
some  and  envied  by  many. 

Now  money-making  and  money  val- 
ues occupy  a  special  place  in  business 
enterprise,  due  to  the  fact  that  on  eco- 
nomic principles  such  money  value  be- 


30  CREATING  CAPITAL 

comes  the  best  test  —  perhaps  the  only- 
true  test  —  of  the  workableness  and  suc- 
cess of  business  efforts.  In  the  compli- 
cated activities  of  the  world's  work, 
where  each  man,  each  undertaking, 
each  business  unit,  respectively,  is  striv- 
ing primarily  for  its  own  advantage, 
how  is  it,  among  all  this  pulling  and 
pushing,  this  competition,  that  the  so- 
cial income  is  distributed  so  nearly  in 
accordance  with  the  individual  contri- 
bution? Even  if  we  admit  that  many 
persons  fail  to  get  a  fair  share,  that  there 
is  gross  inequality  here  and  there,  still 
after  all,  a  student  of  mankind's  activi- 
ties in  production,  distribution,  and  con- 
sumption must  marvel  at  the  extent  to 
which  the  rewards  approximate  the  value 


MONEY-MAKING  AS  AN  AIM    31 

of  contribution.  Now  this  is  made  pos- 
sible by  money  considered  as  a  measure 
of  relative  values,  by  the  standard  or  test 
of  fitness  embodied  in  the  thought.  Will 
it  pay,  and  to  v^hat  extent  w^ill  it  pay? 
If  I  have  in  mind  some  new  invention 
that  will  perhaps  confer  benefits  on  man- 
kind, the  best  test  of  its  practicability 
and  utility  will  be.  Will  it  pay,  will 
people  buy  it,  pay  money  for  it  ?  If  an 
improvement  in  process  is  proposed,  the 
question  is.  Will  it  pay?  If  the  young 
man  starts  out  in  life  with  high  ideals 
and  a  reasonably  good  opinion  of  his 
own  abilities,  an  opinion  fostered  perhaps 
by  fond  parents  and  admiring  friends, 
the  question  is.  Will  these  abilities  fit  in 
with  the  world's  needs?  Will  they  sup- 


32  CREATING  CAPITAL 

ply  a  real  demand,  will  they  be  service- 
able? The  best  means  of  ascertaining 
this,  although  it  may  be  only  a  rough 
estimate  and  although  errors  occasionally 
creep  in  is,  will  they  pay  ?  Can  he  sell 
these  services  for  real  money?  This  cri- 
terion is  practically  omnipresent  in  the 
world  of  affairs.  It  is  based  on  economic 
necessity,  and  although  here  and  there 
it  may  be  charged  with  cruelties,  with 
serious  blunders,  it  is,  on  the  whole,  a 
remarkably  accurate  standard.  We  see 
this  more  clearly  where  we  attempt  to 
substitute  some  other  criterion  for  rank- 
ing the  soldiers  in  the  battle  of  life. 
We  can  note,  for  instance,  the  inferior 
type  and  character,  generally  speaking, 
of  men  elected  to  office  by  the  suffrages 


MONEY-MAKING  AS  AN  AIM    33 

of  their  fellow  citizens,  compared  with 
men  who  reach  positions  of  authority 
in  business  and  other  enterprises  through 
the  pressure  of  these  economic  princi- 
ples. Again,  consider  the  nation  that 
has  attempted  to  improve  on  economic 
distribution  of  power  by  evolving  a  gov- 
ernment which  places  the  power  in  the 
hands  of  those  best  fitted  to  govern,  a 
ruling  class  which  aims  directly  at  effi- 
ciency, a  select  class  but  necessarily  self- 
selected,  thus  supplanting  an  economic 
regime  by  a  military  regime  —  success- 
ful truly  in  certain  forms  of  economic 
efficiency  through  a  more  rigid  and  com- 
pact organization,  but  destructive  of  the 
initiative,  the  evolutionary  growth,  the 
fundamental  development,  the  liberties 


34  CREATING  CAPITAL 

of  the  people.  Contrast  this  with  the 
freedom,  happiness,  and  progress  of  a 
nation  of  shop-keepers.  Now  this  eco- 
nomic regime,  with  its  individual  in- 
stances of  cruelty,  like  the  cruelties  of 
nature,  does  on  the  whole  tend  to  de- 
velop men,  to  require  their  best  efforts, 
to  make  them  come  forward  and  up- 
ward. Thus,  in  this  interplay  of  eco- 
nomic forces,  wealth,  or  money,  or 
profits  stands  out  as  a  primary  object  of 
attainment,  and  becomes  the  incentive 
to  the  complex  efforts  which  tend  to 
benefit  the  individual,  the  community, 
and  the  nation. 

The  business  enterprise  then  directs 
its  attention  to  profits,  because,  from 
mere    economic   necessity,    profits    are 


MONEY-MAKING  AS  AN  AIM    35 

the  criterion  of  the  true  success  of  the 
enterprise,  that  is,  its  serviceability  to 
mankind.  Here  we  distinguish  between 
the  shortsighted  man,  who  aims  at  im- 
mediate returns,  and  the  farsighted  man, 
whose  eye  is  fixed  on  the  future,  who 
verily  desires  the  profits,  but  desires 
them  in  the  long  run.  But  this  is  only 
a  manifestation  of  human  nature  as  we 
find  it  in  every  field.  We  always  note  a 
deficiency  in  the  man  whose  life  is  lived 
for  the  present,  for  immediate  enjoy- 
ment :  in  him  we  see  the  typical  pleas- 
ure-seeker, peculiarly  prone  to  tempta- 
tion, to  break  the  rules  of  life,  to  indulge 
himself  at  the  expense  of  others  or  of 
his  own  future.  He  is  characteristically 
the  weakling,  the  wrongdoer.    And  we 


2^  CREATING  CAPITAL 

contrast  him  with  the  man  of  charac- 
ter, who  stands  superior  to  an  immedi- 
ate environment,  who  will  not  disregard 
the  distant  future,  the  absent  neighbor, 
the  invisible  God.  And  so  in  the  eco- 
nomic world  it  is  the  whole  life  period 
which  is  to  be  regarded  when  aims  are 
chosen.  Profits  as  a  goal  for  the  long 
run  do  not  antagonize  moral  principles. 
**  Honesty  is  the  best  policy  '*  and  "  Do 
unto  others  as  you  would  have  others 
do  unto  you"  are  maxims  of  good  busi- 
ness; and  that  economic  principles  do 
not  conflict  with  them  is  shown  by  the 
fact  that  they  tend  towards  profits  in 
the  long  run.  This  is  not  to  assert  that 
mankind  in  business  is  perfect.  In  every 
period  of  economic  advance  into  a  new 


MONEY-MAKING  AS  AN  AIM    37 

environment,  men  try  new  experiments, 
as  during  the  development  of  the  great 
modern  corporation  in  the  period  fol- 
lowing the  Civil  War  in  this  country 
and,  earlier  than  that,  in  the  era  of  rail- 
road building.  They  have  tried  new 
experiments  in  ethics  as  they  have  in 
physics,  in  chemistry,  in  economics. 
They  have  attempted  to  replace  hon- 
esty by  camouflage,  the  golden  rule  by 
self-aggrandizement.  But  these  attempts 
are  not  successful  and  so  they  become 
discredited;  they  do  not  work  because 
inherently  they  cannot  last,  and  inabil- 
ity to  endure  is  fatal  to  the  purposes  of 
any  economic  undertaking.  We  are  em- 
phasizing the  fact  that  business  is  neces- 
sarily conducted  for  the  long  run,  the 


38  CREATING  CAPITAL 

very  nature  of  success  implying  per- 
manence. A  man  may  take  some  crim- 
inal advantage  of  an  opportunity :  he 
may  abscond  with  money  entrusted  to 
him;  he  may  abuse  the  confidence  re- 
posed in  him  by  an  employer,  by  a  cus- 
tomer; he  may  obtain  an  immediate 
profit  by  misrepresentation.  But  no  one 
could  expect  such  things  to  last ;  he 
could  not  possibly  be  building  an  endur- 
ing structure;  such  a  course  could  not 
in  the  end  promise  him  profits,  or  any 
other  kind  of  success.  A  properly  con- 
ducted business  enterprise  then  is  con- 
cerned with  making  profits  in  the  long 
run  ;  that  is  to  say,  in  accordance  with 
accepted  notions  of  business  conduct; 
in  short,  according  to  rules  of  the  game. 


MONEY-MAKING  AS  AN  AIM    39 

and  this  involves  conformity  v^ith  a 
standard,  a  standard  of  giving  good 
value  for  w^hat  one  gets. 

We  must  next  distinguish  between 
gross  profits  and  net  profits.  The  mer- 
chant or  manufacturer  naturally  desires 
to  do  a  large  business,  he  points  with 
pride  to  the  increase  in  his  sales  this  year 
over  last  year.  The  larger  his  turnover 
the  smaller  the  proportionate  amount  of 
his  overhead  expenses  that  must  be  borne 
per  unit  of  product,  and  other  economies 
follow  large-scale  production  or  distri- 
bution. He  may  occasionally  be  desir- 
ous of  increasing  his  output  even  when 
it  entails  a  disproportionate  increase  in 
his  expenditures,  with  the  idea  that  he 
can  later  occupy  himself  with  reducing 


40  CREATING  CAPITAL 

these  expenses  and  in  the  meanwhile 
the  goodwill  of  his  enterprise  will  have 
gained  from  the  larger  circle  of  cus- 
tomers. Such  is  the  case  with  a  new 
enterprise  that  often  starts  out  with  the 
expectation  of  little  or  no  profits  during 
its  early  years,  when  it  is  gathering  a 
clientele  and  learning  to  distribute  its 
product  with  economy.  All  these,  how- 
ever, are  special  cases.  The  normal  sit- 
uation is  that  the  business  enterprise  is 
aiming  at  net  profits,  having  an  interest 
in  large  sales,  heavy  transactions  and 
gross  profits  only  so  far  as  these  are  ex- 
pected to  lead  finally  to  net  profits,  the 
real  goal.  Now  these  net  profits  are,  of 
course,  the  remainder  of  earnings  left 
on  hand  after    providing   for  all   costs 


MONEY-MAKING  AS  AN  AIM    41 

and  expenses,  for  depreciation  and  every 
other  factor  causing  loss,  destruction, 
and  deterioration  during  the  business 
period  under  consideration.  In  short, 
the  business  capital  as  it  was  at  the  be- 
ginning of  the  period  is  first  fully  re- 
stored and  made  intact  at  the  end  of  the 
period  before  a  net  profit  emerges.  This 
net  profit  therefore  becomes  in  a  true 
sense  a  creation  of  new  capital  and  may 
indeed  be  retained  in  the  business  as  an 
addition  to  capital  funds.  Even  when 
it  is  paid  out  in  dividends,  partly  or 
wholly,  it  becomes  new  capital  in  the 
hands  of  the  individual  stockholders 
who  then  in  their  private  capacity  may 
of  course  spend  it,  but  by  proper  invest- 
ment may  keep  it  permanently  stored 


42  CREATING  CAPITAL 

as  capital.  It  is  the  creation  of  capital 
then,  that  is  in  reality  the  ultimate 
money-making  aim  of  the  business  en- 
terprise. 

We  can  now  summarize  the  attitude 
and  policy  of  the  typical  business  man  in 
his  money-making  aim  as  follows : 

In  seeking  profits  he  is  actuated  by 
economic  necessity. 

His  goal  is  profits  in  the  long  run, 
which  involves  conformity  with  eco- 
nomic and  ethical  standards,  and  net 
profits,  which  implies  the  creation  of 
capital. 

The  creation  of  capital  we  cannot  fail 
to  recognize  as  a  worthy  aim.  It  has 
given  mankind  much  of  all  that  man- 
kind possesses  and  constitutes  the  founda- 


MONEY-MAKING  AS  AN  AIM  43 
tion  upon  which  civilization  largely  rests. 
The  advancement  in  the  arts  and  sciences 
has  been  in  no  small  degree  stimulated 
by  the  demands  of  business  enterprise  for 
new  methods  of  creating  capital  and  we 
may  believe  that  should  the  time  arrive 
when  this  motive  should  fail,  when  men 
should  grow  to  be  indifferent  in  their 
attitude  towards  profits,  the  ensuing  stag- 
nation would  affect  every  department  of 
human  endeavor.  Of  this  we  may  be 
assured  even  when  we  remember  that 
money-making,  and  what  goes  with  it, 
is  not  the  only  aim  in  life. 

After  cataloguing  so  much  that  is  vir- 
tuous in  the  pursuit  of  money-making  the 
suggestion  is  inevitable  that  there  must 
be  some  other  side  to  it,  that  the  com- 


44  CREATING  CAPITAL 

mon  views  of  the  rapacity  of  the  money- 
maker cannot  be  wholly  unfounded. 
What  then  are  the  vices  of  the  money- 
making  aim  ?  In  examining  this  question 
we  shall  first  brush  aside  some  things  to 
which  we  have  already  referred.  The 
pathological  cases  of  mere  crime,  of  sharp 
practice,  of  taking  advantage  of  others, 
while  mounting  up  into  distressingly 
high  figures  considered  absolutely,  are 
much  less  important  relatively;  that  is, 
they  are  infrequent  and  scarce  enough 
to  avoid  obscuring  the  rule  which  they 
violate,  the  rule  that  honesty  is  indis- 
pensable in  economics  as  well  as  in 
ethics.  What  we  must  now  investigate 
is  any  vicious  tendencies  that  may  be 
found  in  the  money-making  aim  when 


MONEY-MAKING  AS  AN  AIM    45 

followed  normally  and  according  to  its 
own  accepted  principles.  Of  such  de- 
generative tendencies  we  seem  to  find 
two:  first,  the  tendency  to  that  excess 
which  becomes  a  vice;  and  second,  the 
tendency  to  a  disregard  of  other  consid- 
erations in  life  through  too  exclusive  a 
devotion  to  acquisitiveness.  But  upon 
further  thought  we  must  see  that  these 
two  tendencies  flow  together  and  become 
one,  for  too  much  devotion  to  money- 
getting  and  too  little  attention  to  the 
other  purposes  of  life  are,  after  all,  ex- 
pressions of  the  same  thing.  Perhaps  a 
man  may  err  in  excessive  devotion  to 
any  object  of  life  but  we  must  admit 
that  in  the  pursuit  of  gain  the  evil  tend- 
ency to  exaggerated  absorption  in  the 


46  CREATING  CAPITAL 

one  aim  is  promoted  through  a  coopera- 
tion with  his  natural  selfishness.  Of  all 
the  fields  of  human  endeavor,  here  is  one 
that  peculiarly  fits  in  with  self-seeking, 
with  disregard  for  others,  which  may 
drag  a  man  downward,  making  him  small 
and  mean,  unhappy  and  uncharitable, 
while  apparently  attaining  the  goal  at 
which  he  has  aimed.  Not  every  man, 
while  concentrating  upon  money-mak- 
ing, is  consciously  seeking  his  country's 
welfare,  the  amelioration  of  life  for  the 
many,  the  uplift  of  posterity,  even  if  he 
rigidly  adheres  to  the  accepted  rules  of 
the  game,  to  the  code  of  business  honor. 
This  brings  us  back  to  the  popular  pic- 
ture of  the  money-maker,  grasping, 
sordid,  narrow-minded.  There  are  such 


MONEY-MAKING  AS  AN  AIM    47 

people.  I  believe  them  to  be  rare,  but 
whether  there  are  many  of  them  to-day 
or  not,  it  is  a  type  tending  to  disappear 
in  the  environment  of  modern  business 
v^hich  offers  its  inducements  and  rewards 
to  him  who  does,  who  becomes,  who 
renders  service,  not  to  the  sordid  seeker 
for  gain.  Barring  an  occasional  excep- 
tion, such  an  exclusive  aim  is  not  that 
of  the  man  of  large  affairs,  the  business 
leader,  the  conspicuously  successful  man. 
It  is  not  Harriman,  nor  Edison,  nor 
Weinstock,  nor  Marshall  Field,  nor  Pea- 
body,  nor  is  it  the  heads  of  our  big 
corporations  of  to-day.  Such  men  are 
money-makers,  creators  of  capital,  build- 
ers of  large  enterprise,  but  their  aim  at 
profits  while  genuine  is  only  incidental 


48  CREATING  CAPITAL 

to  their  main  purpose  of  doing,  of  be- 
coming better  able  to  achieve,  of  ren- 
dering service.  When  the  beginner  in 
business  approaches  an  experienced  friend 
for  advice,  he  is  told  to  work  as  hard 
and  as  faithfully  as  possible,  to  study  his 
business,  to  seek  to  improve  himself — 
in  other  words,  to  concentrate  his  whole 
strength  on  the  giving  of  service,  for  his 
wages  or  salary  will  take  care  of  itself. 
The  experienced  man  knows  well  that 
this  holds  just  as  truly  for  all  ranks  in 
the  busii\ess  world  and  that  the  higher 
one  ascends  in  responsibilities,  the  more 
he  must  give  and  do;  indeed  the  leading 
positions  in  the  business  world  are  occu- 
pied by  men  who  produce  tremendously, 
whose  value  to  themselves  and  others  lies 


MONEY-MAKING  AS  AN  AIM    49 

in  what  they  accomplish,  and  this  — 
not  what  they  get  —  is  the  criterion  of 
success  among  men  of  experience,  among 
those  in  charge  of  enterprises,  who  are 
on  the  lookout  for  leaders  of  this  type. 
Here  we  have  the  remedy  for  the  tend- 
ency backed  by  natural  selfishness  to- 
wards undue  devotion  to  gain :  such 
narrowness  simply  does  not  work,  it  is 
crowded  out  by  competition  with  the 
superior  efficiency  of  broader  motives. 
And  while,  here  and  there,  the  type  con- 
tinues to  exist,  its  development  in  new 
cases  is  discouraged  by  every  instance 
illustrating  the  relative  success  —  in  all 
senses  —  attained  by  those  who  make  it 
their  chief  aim  to  produce,  to  render 
service.  Just  as  the  physician  bestows  his 


so  CREATING  CAPITAL 

first  thought  upon  his  patient,  these  su- 
perior business  men  give  first  consider- 
ation to  their  profession,  for  so  they  re- 
gard it,  and  this  tends  to  assure  their 
success,  just  as  it  does  that  of  the  phys- 
ician, and  to  become  the  standardized 
ideal  for  lesser  men. 

It  is  indeed  clearly  self-evident  that  on 
many  accounts  the  man  in  business  must 
give  attention  primarily  to  the  service 
he  is  trying  to  render.  The  clerk  in  the 
store  must  devote  himself  mainly  to  his 
customers,  to  his  merchandise,  to  his 
other  duties,  not  to  his  salary.  And  so 
v^ith  the  department  manager,  and  so 
with  the  general  manager,  whether  of  a 
store,  a  railroad  company,  or  other  ac- 
tivity ;  the  immediate  daily  problem  for 


MONEY-MAKING  AS  AN  AIM     51 

all  lies  in  the  rendering  of  a  service,  the 
producing  of  a  commodity,  or  the  doing 
of  the  thing  for  which  the  business  en- 
terprise exists.  This  concentration  upon 
output  is  furthermore  required  by  com- 
petition which  whips  the  producer  into 
line  and  often  makes  it  a  matter  of  busi- 
ness life  and  death  that  one  should  make 
progress  in  method  and  quality.  That 
his  shoes  wear  is  a  matter  of  pride  to 
the  shoe  manufacturer.  "  Blank  tires  are 
good  tires"  is  not  to  be  regarded  as 
merely  a  boastful  advertisement.  If  it  was 
it  would  not  pay  the  advertising  cost. 

Money-making  as  an  aim  thus  be- 
comes subsidiary  to  the  characteristic  ac- 
tivities of  the  enterprise,  it  is  in  a  sense 
a  by-product.    But  the  money-making 


52  CREATING  CAPITAL 

aim  is  there,  although  perhaps  in  the 
background.  It  is  furnishing  the  power 
under  which  the  enterprise  operates. 
More  than  that,  it  is  the  gauge  indicating 
the  prosperity  or  lack  of  prosperity  of  the 
enterprise,  its  progress,  its  fitting  in  with 
the  needs  of  life.  In  short,  the  money- 
making  aim  spurs  on  the  business  enter- 
prise, just  as  the  weekly  or  monthly  pay 
spurs  on  the  humble  worker;  but  in  each 
case  the  main  attention  is  given,  and 
necessarily  given,  to  the  work  to  be  per- 
formed. 

Let  us  now  consider  some  of  the  im- 
plications of  this  concentration  on  ren- 
dering service.  The  directed  effort  of 
each  man  to  the  production  of  the  utility 
characteristic  of  his  business,  tends  to  re- 


MONEY-MAKING  AS  AN  AIM     53 

suit  in  his  learning  to  conduct  that  spe- 
cific activity  with  a  high  degree  of  skill, 
and  with  an  increasingly  valuable  fund 
of  experience.  So  highly  specialized  does 
he  become  that  it  will  be  quite  impos- 
sible for  any  one  hitherto  a  stranger  in 
that  sphere  to  conduct  it  as  well.  There- 
fore in  an  age  of  coordinated  effort  the 
more  a  man  has  of  accumulated  knowl- 
edge and  facility  in  handling  a  certain 
kind  of  affair  and  the  better  fitted,  there- 
fore, he  is  to  continue  and  to  progress 
along  that  line,  the  less  relatively  he  is 
able  to  undertake  the  affairs  of  some 
other  kind  with  which  he  is  not  familiar. 
We  commonly  feel  free  to  criticize  a 
railroad,  a  newspaper,  a  large  business 
house,  perhaps  a  university,  with  which 


54  CREATING  CAPITAL 

we  may  have  casual  contact,  but  the  fact 
is  there  are  few  competent  critics  out- 
side of  the  ranks  of  the  enterprise  itself 
or  of  those  carrying  on  activities  that  are 
directly  similar.  In  a  word,  through  this 
focusing  of  attention,  a  man  will  come  to 
be  exhaustively  familiar  with  his  own 
occupation,  while  possessing  a  merely 
superficial  acquaintance  with  the  the- 
ories, customs,  and  responsibilities  of 
those  of  others.  The  wise  man  therefore 
argues  the  necessity  of  confining  himself 
to  the  field  in  which  he  has  become 
expert  and  will  avoid  taking  chances  in 
some  outside  direction  wherein  he  is  not 
familiar.  One  of  the  most  common  and 
disheartening  experiences  in  the  money- 
making  and  money-saving  of  the  thrifty 


MONEY-MAKING  AS  AN  AIM  S5 
is  that  after  having  both  worked  hard  and 
practiced  self-restraint,  the  resultant  sav- 
ings are  often  put  into  some  enterprise 
that  turns  out  badly,  and  the  whole  effort 
is  thus  thrown  away.  Generally  this  hap- 
pens because  he  has  violated  the  rule  we 
have  just  stated;  he  has  ventured  his  sav- 
ings in  unfamiliar  fields,  ignorantly  he 
has  rushed  in  where  the  better  informed 
would  have  feared  to  tread.  Such  so- 
called  investments  are  in  reality  highly 
speculative.  They  involve  risks  which  are 
unknown  and  altogether  to  be  avoided. 
Now  no  one  speculates  in  his  own  legiti- 
mate business,  for  there  he  is  acquainted 
with  the  hazards  which,  he  has  learned, 
require  the  best  of  knowledge  and  the 
greatest  of  prudence.  It  is  the  allurement 


S6  CREATING  CAPITAL 

of  the  unknown  that  tempts  him  to  seek 
unearned  profits  through  speculation  in 
outside  regions  where,  in  the  nature  of 
the  case,  the  chances  must  be  against  him. 
Now  speculation  has  its  proper  place  in 
business :  there  are  certain  inherent  haz- 
ards that  must  be  undertaken,  mainly  to 
be  found  in  the  risk  of  the  seasons  in 
the  production  of  crops,  and  the  risk  of 
the  future  in  undeveloped  enterprise. 
These  risks  must  be  carried  by  somebody, 
but  clearly  they  constitute  an  activity  for 
specialists  who  study  conditions,  becom- 
ing relatively  expert  in  determining  how 
and  when  to  act.  These  specialists  are 
drawn  principally  from  two  classes :  First, 
the  professional  speculator,  who  knows 
his  markets  and  makes  a  business  of  buy- 


MONEY-MAKING  AS  AN  AIM     57 

ing  and  selling  future  risks;  such  men 
perform  a  great  service  in  handling  our 
seasonal  crops  and  in  other  directions, 
and  are  entitled  to  a  reasonable  profit. 
Second,  the  man  of  wealth  who  may  use 
part  of  his  surplus  in  the  risks  of  unde- 
veloped enterprise;  although  it  is  prob- 
able that  in  the  end  his  losses  and  ex- 
penses will  outweigh  his  gains,  he  can 
afford  to  take  chances  of  such  experi- 
ments in  the  hope  that  success  will  fol- 
low in  some  of  them;  furthermore,  he 
can  regard  the  outlay  as  a  contribution 
to  the  advancement  of  mankind.  For 
the  rest  of  us,  however,  outside  of  these 
two  classes,  it  is  our  business  to  keep 
away  from  speculation  whether  in  oil 
wells,  flying  machines,  in  new  factories. 


58  CREATING  CAPITAL 

or  in  real  estate :  in  the  long  run,  we 
cannot  get  something  for  nothing  and 
money-making  efforts  that  are  ethically 
valid  thus  coincide  with  those  that  are 
selfishly  desirable,  namely,  the  efforts 
to  obtain  the  payment,  the  profit,  that 
arises  from  a  valuable  service  performed 
or  commodity  produced.  Too  often  men 
who  follow  this  rule  in  their  regular 
occupation  depart  from  it  in  the  use 
of  their  saved  surplus  funds.  They  feel 
that  their  savings  ought  to  make  them 
money,  as  they  say. 

Now  savings  can  be  employed  in  one 
of  three  ways:  They  may  be  used  as 
capital  by  the  owner;  or  they  may  be 
put  out  in  investments  —  that  is,  used 
or  utilized  as  capital  in  the  business  of 


MONEY-MAKING  AS  AN  AIM     59 

another;  or,  third,  they  may  be  wasted 
in  gambling  or  speculation.  As  a  matter 
of  course,  the  employment  as  additional 
capital  in  one's  own  enterprise  is  gener- 
ally the  most  desirable  wherever  applic- 
able, but  this  is  a  use  of  limited  scope, 
relating  to  but  few  of  the  people  en- 
gaged in  productive  activity  who  earn 
and  save  a  surplus.  The  main  resource 
for  such  accumulations  is  in  safe  invest- 
ments, in  the  bonds  and  securities  of 
our  own  country  and  those  of  well  es- 
tablished enterprises.  Not  many  among 
our  embryo  capitalists  possess  the  expe- 
rience or  skill  requisite  for  the  safe  and 
proper  investment  of  their  funds,  they 
must  rely  upon  the  advice  of  others. 
But  whom  can  they  trust?  The  demand 


6o  CREATING  CAPITAL 

for  investment  advice  has  not  failed  to 
call  forth  a  supply  of  advisers,  and  elab- 
orate are  the  schemes  designed  to  lure 
the  unwary.  But,  generally  speaking, 
the  man  who  falls  into  the  clutches  of 
these  birds  of  prey  has  himself  to  blame, 
for  the  reason  that  the  temptations  they 
offer  are  appeals  to  the  illegitimate  de- 
sire to  get  something  for  nothing  or  to 
the  foolish  notion  that  one  can  get-rich- 
quick  in  some  way  whispered  about  by 
a  stranger,  and  out  of  sheer  benevolence. 
The  fact  is  that  the  wise  man  will  dis- 
miss all  thought  of  making  money  out 
of  his  investments;  he  will  seek  only  the 
moderate  return  which  alone  is  consist- 
ent with  safety ;  and  with  this  policy,  will 
turn  a  deaf  ear  to  any  so-called  oppor- 


MONEY-MAKING  AS  AN  AIM     6i 

tunity  which  promises  big  profits.  We 
can  summarize  the  matter  by  saying  that 
concentration  upon  one's  business  and 
service  implies  that  one  should  not  at- 
tempt to  make  money  elsewhere. 

This  concentration  on  one's  affairs 
therefore  grows  into  a  sort  of  practical 
system  in  which  each  member  of  the 
business  comm.unity  is  looking  after  some 
function  or  activity  to  the  exclusion  of 
other  things.  And  so  the  world's  work 
is  carried  on  to  the  best  advantage,  each 
function  being  filled  by  those  particular 
men  who  have  become  relatively  expert 
therein.  From  this  system  arises  a  busi- 
ness habit  or  method  not  always  under- 
stood by  the  young  and  inexperienced, 
by  the  non-business  person.  We  refer 


62  CREATING  CAPITAL 

to  the  practice  in  trade  of  leaving  to 
each  individual,  to  each  enterprise,  to 
each  organization,  the  responsibility  for 
looking  out  for  its  own  interests  vi^hen 
having  dealings  with  others.  Caveat 
emptor  —  let  the  buyer  beware  —  ex- 
presses an  extreme  development  of  this, 
and  in  its  common  signification,  that 
each  side  is  to  be  permitted  and  expected 
to  take  any  advantage  of  the  other  side 
that  it  may  be  able  to  secure,  it  de- 
scribes a  state  of  warfare  rather  than  of 
business.  In  buying  and  selling,  in  aim- 
ing to  obtain  the  most  favorable  terms 
for  each  line  of  his  activity,  in  meeting 
conditions  of  competition,  in  all  these 
relations,  the  business  man  is  endeavor- 
ing to  better  himself  and  may  doubtless 


MONEY-MAKING  AS  AN  AIM     6^ 

be  tempted  here  and  there  to  forget  the 
interests  of  the  other  party  to  the  trans- 
action. But  to  yield  to  such  temptation 
would  merely  be  to  abuse  a  principle 
which  on  the  whole  is  sanctioned  by 
the  requirements  of  economic  efficiency. 
This  principle  is  that  the  nearest  ap- 
proximation to  effective  justice  in  busi- 
ness transactions  is  reached  when  on 
each  side  the  parties  devote  themselves 
to  their  respective  interests  and  points 
of  view.  If  u4  has  a  house  for  sale  and 
^  is  a  prospective  buyer,  the  essence  of 
the  possible  transaction  between  the  two 
is  that  ^'s  idea  of  the  value  of  the  prop- 
erty is  different  from  5's  idea  of  that 
value;  or  at  any  rate  that  ^  sees  less 
value  in  it  to  him  than  does  B  to  B. 


64  CREATING  CAPITAL 

This  is  of  course  typical  of  all  business 
transactions  —  the  seller  desires  the 
money  above  the  commodity,  the  buyer 
prefers  the  commodity  to  the  money. 
The  seller  and  the  buyer  each  dwells 
naturally  upon  his  own  idea  of  value. 
This  is  altogether  desirable,  not  to  say 
indispensable,  and  is  characteristic  of 
every  relation  of  business,  wherever  two 
men  buy  and  sell,  employ  one  another, 
or  have  other  dealings  together.  The 
situation  is  somewhat  the  same  as  in  a 
law  suit  where  the  duty  of  the  attorney 
for  the  plaintiff  is  to  make  every  point 
that  fairly  can  be  made  for  the  plaintiff, 
while  the  attorney  on  the  other  side 
must  correspondingly  make  every  point 
that  can  properly  be  made  for  the  de- 


MONEY-MAKING  AS  AN  AIM     6s 

fendant.  Each  side  is  supposed  to  look 
after  the  interest  of  that  side.  Similarly, 
in  a  business  organization,  say  a  railroad, 
when  some  new  project  is  under  con- 
sideration it  will  be  submitted  to  the 
engineer,  to  the  chemist,  to  the  attor- 
ney, to  the  practical  transportation  man, 
and  in  each  of  these  departments  it  is 
expected  that  the  wisdom  born  of  ex- 
perience in  the  particular  function  will 
be  brought  to  bear.  The  engineer  speaks 
with  authority  on  engineering  questions, 
the  lawyer  on  legal  questions,  the  trans- 
portation man  on  the  practical  working 
out  of  the  project;  and,  normally,  the 
criticisms  and  contribution  of  each  are 
confined  to  his  own  function.  In  short, 
the  regime  of  economic  self-interest  re- 


66  CREATING  CAPITAL 

suits  in  leaving  to  each  the  responsibil- 
ity which  he  is  most  competent  to  as- 
sume, that  in  which  he  is  most  expert, 
which  thereby  receives  the  best  atten- 
tion that  generally  speaking  it  could 
have.  Nor  are  correctives  lacking  for 
the  abuses  which  may  enter  in  through 
an  overdevelopment  of  self-interest. 
Caveat  emptor  becomes  discredited  as  an 
unmodified  basis  of  human  action.  The 
golden  rule  is  increasingly  seen  to  con- 
stitute a  foundation  demanded  by  eco- 
nomics as  well  as  by  ethics.  The  trend 
to-day  is  away  from  indifference  to  the 
interests  of  those  with  whom  we  deal. 
The  successful  merchant  will  not  at- 
tempt to  make  a  profit  through  sales 
which  he  knows  would  not  benefit  the 


MONEY-MAKING  AS  AN  AIM     67 

purchaser,  for  that  would  not  measure 
up  to  the  test,  Will  it  pay?  The  value 
of  a  business  depends  largely  on  its  good- 
will and  too  much  money  and  effort  are 
spent  in  advertising  and  other  means  of 
building  up  a  clientele  to  make  men 
conceive  it  to  be  to  their  interest  to  deal 
sharply  with  their  customers. 

In  the  efforts  of  scientists  to  seek  out 
and  establish  new  methods,  new  princi- 
ples, the  success  of  an  experiment  is  to 
be  determined,  I  suppose,  by  the  test. 
Will  it  work?  Does  it  yield  effective 
results  ?  Similarly,  in  economics,  the  sci- 
ence of  mankind  in  its  production,  dis- 
tribution and  consumption  of  material 
things,  the  test  of  utility  and  efficiency 
is.  Will  it  pay  ?  that  being  the  standard 


68  CREATING  CAPITAL 

of  workableness  in  the  application  of 
that  science. 

We  have  attempted,  therefore,  in  this 
analysis  of  money-making  to  apply  this 
test,  because  the  practice  or  habit  or  in- 
fluence that  pays  is  that  which  is  in  ac- 
cord so  far  with  the  principles  under- 
lying this  branch  of  social  science.  We 
have  seen,  according  to  this  standard, 
that  it  is  the  duty  of  all  to  adopt  money- 
making  as  a  conscious  aim ;  that  the 
money  is  to  be  economically  used,  the 
final  object  being  net  profit,  that  balance 
or  remainder  which  is  carried  forward 
as  created  capital.  Inability  to  increase  a 
fixed  income  does  not  absolve  one  from 
the  duty  of  doing  one's  part  in  the  cre- 
ation of  capital  through  thrift  and  sav- 


MONEY-MAKING  AS  AN  AIM     69 

ing.  The  business  enterprise,  moreover, 
is  required  by  economic  necessity  to  aim 
at  money-making  —  meaning,  however, 
profits  in  the  long  run  rather  than  im- 
mediate or  temporary  gains.  Such  perma- 
nent returns  can  only  be  sought  through 
adherence  to  ethical  principles  and  al- 
though this  aim  at  profits  becomes  the 
power  plant  which  drives  the  business 
machine,  the  latter  gives  its  energies  and 
attention  more  directly  to  the  rendering 
of  service. 

Concentration  upon  service  tends  to 
make  a  man  relatively  efficient  therein, 
but  argues  a  relative  unfamiliarity  with 
the  field  of  others,  from  which  we  infer 
the  advisability  of  confining  one's  activ- 
ity to  the  thing  he  has  learned  to  do 


70  CREATING  CAPITAL 

best.  As  an  example  of  this,  he  should 
avoid  placing  his  surplus  capital  or  sav- 
ings in  outside  enterprises  where  they 
will  partake  of  risks  that  are  unknown 
to  him,  nor  should  he  attempt  to  employ 
his  savings  at  all  with  the  purpose  of 
making  money,  unless,  indeed,  he  can 
use  them  as  capital  in  his  own  business. 
The  focusing  of  attention  on  one's  own 
function  also  implies  and  explains  the 
custom  of  placing  upon  participants  in 
a  business  transaction  the  responsibility 
each  for  his  own  side,  a  custom  which 
is  economically  justified  but  which  must 
be  kept  within  proper  limits,  as  is  fully 
recognized  by  the  business  men  who  are 
successful  and  who  therefore  become 
models  or  examples   for   the  guidance 


MONEY-MAKING  AS  AN  AIM    71 

of  other    men,    influencing    the    latter 
towards  high  ideals. 

We  have  found,  on  the  othej  hand, 
that  apart  from  men  in  charge  of  busi- 
ness enterprise,  the  burden  of  providing 
thus  for  man's  welfare  and  development 
is  assumed  by  very  few,  the  vast  majority, 
whether  in  professional  or  business  em- 
ployment, treating  it  with  neglect  and 
contempt.  They  think,  perhaps,  that 
they  are  aiming  "at  higher  things,  or 
that  their  efforts  would  not  sufficiently 
count,  or  they  do  not  give  the  matter 
any  sturdy  thought;  while  the  under- 
lying motive,  often  unconscious,  is  sim- 
ply an  unwillingness  to  practice  self-re- 
straint. It  is  self-indulgence,  we  must 
conclude,  that  is  to  be  overcome  if  we 


W-KTA 


?ifsr^-s:^->^--^ 


72  CREATING  CAPITAL 

are  to  meet  this  responsibility  in  a  manly 
way,  visualizing  it  with  sufficient  clear- 
ness to  see  that  thrift,  the  creation  of 
capital  for  one's  self  and  for  the  race, 
comes  into  no  necessary  conflict  with 
any  other  proper  aim  in  life,  but  on 
the  contrary  constitutes  a  fundamental 
duty  to  society,  to  the  state,  to  one's 
family,  to  his  own  future,  to  his  self- 
respect. 


UNIVERSITY  OF  CALIFORNIA 


3   1205  00544  0118 


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